Wheat as well as sugar are commodities of much concern to the government. Both are subsidised and given out in the public distribution system (PDS); hence the government has to procure enough of them to keep the PDS supplied through the year. Sugar is obtained from a levy on sugar mills. But a levy on wheat farmers would be not just unpopular but unenforceable. So the government relies on less draconian tactics to procure it.

In the north, wheat and sugar are substitute crops. Sugar is subject to a four-year cycle of gluts and shortages, which causes ripples in wheat production as well. The sugar cycle has been distorted by the ongoing boom in the economy. As people have got more money in their pockets, they have been eating more sweets. Sugar output has responded to the demand. From 13 million tonnes in 2004-05, it increased to 19.3 million tonnes in 2005-06. But it could not keep up with demand. Sugar price, which was in the range of Rs 17-21 a kg in January 2005, had risen to Rs 21-23 by the middle of 2006. So in
July 2006, the government allowed unlimited imports of sugar without duty.

The high prices lured farmers to grow more cane. As the current cane year has progressed, estimates of sugar output have been rising; now they are touching 25 million tonnes (for the year from July 2006 to June 2007). Indians would have no difficulty in eating up all that sugar if the price was right. But the industry’s ideas of the right price are different from those of its consumers. So it approached the government to allow sugar exports. Exports would have been more profitable for sugar mills in the south, which are closer to ports. That made northern mills jealous, and their owners went to complain to Sharad Pawar, minister of agriculture. They found the minister receptive, for the Uttar Pradesh elections are looming, and the government sees an advantage in making the north Indian millers happy. So, he has announced a combination of favours for the industry, which includes a subsidy on exports as well as an offer to buy up sugar from the industry and create a large buffer stock, at the cost of the government.

But the rising sugar prices have made wheat growing less attractive; wheat production refuses to rise above 73 million tonnes, which was reached in 2001-02. Wheat procurement fell from 20.6 million tonnes in 2001-02 to under 10 million tonnes in the current year — so inadequate that the government had to import wheat in order to keep the PDS supplied.

In desperation, the government raised the procurement price of wheat from Rs 650 to Rs 750 a quintal this year. But it had not reckoned on the outcome of the Punjab elections. Shiromani Akali Dal has no interest at heart other than that of the Punjab farmer; Parkash Singh Badal, the new chief minister, is asking for a procurement price of Rs 900. Meanwhile, rumours are afloat that the government will give its own Food Corporation (FCI) a monopoly of procurement and will not allow private parties — manufacturers of flour, bread and biscuits — to buy wheat in Punjab and Haryana. The rumours are inflaming farmers, who are talking of refusing — to sell to FCI.

The government would like to reward sugar mill owners with high prices, and procure wheat at low prices. But its two objectives are inconsistent: if it keeps sugar prices high and wheat procurement prices low, it will not be able to procure enough wheat for the PDS. Pawar, who sees this contradiction, thought of getting rid of one half of the problem by decontrolling sugar. If he did not have to collect sugar levy for the PDS, sugar producers would get a higher average price. They would still have the problem of excess production; but Pawar would help them out to export and to hold sugar inventories. But he has not been able to persuade the Prime Minister’s Office, which loves the PDS.

So it is likely that the government will not be able to procure enough of wheat, and will import 8-10 million tonnes this year as well. That is the easy part. But before it gets there, it will have Punjab and Haryana farmers up in arms. Badal will ask the Prime Minister how he can import wheat at higher prices than the procurement prices — in what way Punjabi farmers are inferior to American farmers. The farmers of Bengal have given the lead: they have stopped forced acquisition of their land. The north Indian farmers may well say: no forced acquisition of their wheat. Till now, the revolt against arbitrary, overbearing governments was largely confined to the middle class. Now it is spreading; unless the government returns to liberal policies, it has a hot summer ahead of it.